Medallia Reports Record Third Quarter Fiscal 2020 Financial Results

SAN FRANCISCO–(BUSINESS WIRE)–Medallia Inc. (NYSE: MDLA), the global leader in experience management, today announced financial results for the quarter ended October 31, 2019.

“I am very pleased with the momentum in our business that has carried into the fourth quarter. During the third quarter, we crossed the $100 million quarterly revenue milestone, added many more marquee customers and grew our year-over-year subscription and total revenue,” commented Leslie Stretch, president and CEO, Medallia. “New signings included Amadeus, American Axle & Manufacturing, Inc., Amtrak, Hard Rock Cafe, Pizza Hut and Softbank.”

Stretch continued, “We also expanded our ability to transform customer experience in real-time with the acquisition of Crowdicity, a crowdsourcing innovation and idea solution, and Zingle, a multi-channel mobile messaging technology, already in use in many of our hospitality customers. Our platform and signal story is resonating with customers and prospects alike, our scale and ability to out-innovate the market is being clearly recognized and this positions us well for the future.”

Financial Highlights for the Third Quarter of Fiscal 2020

Total revenue for the quarter was $103.1 million, an increase of 27% from the same period last year. Subscription revenue was $79.7 million, an increase of 26% from the same period last year.

Loss from operations for the quarter was $41.7 million, compared to loss from operations of $16.5 million in the same period last year. Non-GAAP loss from operations for the third quarter was $2.0 million, compared to a non-GAAP loss from operations of $8.8 million in the same period last year.

Net loss for the quarter was $39.6 million, or ($0.31) per share, basic and diluted, compared to net loss of $16.6 million, or ($0.60) per share, basic and diluted, in the same period last year. Non-GAAP net loss was $932,000, or ($0.01) per share, basic and diluted, compared to non-GAAP net loss of $9.0 million, or ($0.33) per share, basic and diluted, in the same period last year.

Cash, cash equivalents and marketable securities were $319.3 million as of October 31, 2019.

For information regarding the non-GAAP financial measures discussed in this press release, please see the section titled “Non-GAAP Financial Measures.” Reconciliations between GAAP and non-GAAP financial measures are provided in the tables of this press release.

Recent Highlights

Launched the Medallia City Tours, bringing the company’s annual Experience Conference to eleven cities around the globe.

At Dreamforce, Medallia was the official feedback partner at Salesforce’s Dreamfest, the main evening event, and an innovator sponsor for the conference.

Expanded our ServiceNow partnership providing certified integrations with ServiceNow’s Customer Service and IT Service Management on the ServiceNow store.

Medallia will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) today to discuss the third quarter of fiscal 2020, our outlook for the fourth quarter and the full fiscal year 2020, as well as a preliminary outlook for the full fiscal year 2021. The conference call will be available via live webcast and replay at the Investor Relations section of Medallia’s website: https://investor.medallia.com/events-and-presentations/default.aspx.

About Medallia

Medallia (NYSE: MDLA) is the pioneer and market leader in Experience Management. Medallia leads the market in the understanding and management of experience for customers, employees and citizens. Medallia captures experience signals created on daily journeys in person, digital and IoT interactions and applies proprietary AI technology to reveal personalized and predictive insights that can drive action with tremendous business results. Using the suite of experience management and innovation solutions offered by Medallia, customers can engage employees, reduce churn, turn detractors into promoters and buyers and create in-the-moment cross-sell and up-sell opportunities providing clear and potent returns on investment.

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release and the accompanying tables contain, and the conference call will contain, non- GAAP financial measures, including non-GAAP gross profit, non-GAAP subscription revenue gross profit, non- GAAP operating expenses, non-GAAP loss from operations, non-GAAP net loss and non-GAAP net loss per share, basic and diluted. Our management uses these non-GAAP financial measures internally in analyzing our financial results and believes they are useful to investors, as a supplement to the corresponding GAAP financial measures, in evaluating our ongoing operational performance and trends and in comparing our financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses. However, it is important to note that the particular items we exclude from, or include in, our non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. In addition, other companies may utilize metrics that are not similar to ours.

The non-GAAP financial information is presented for supplemental informational purposes only and is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. There are material limitations associated with the use of non-GAAP financial measures since they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. Please see the reconciliation tables at the end of this release for the reconciliation of GAAP and non-GAAP results. Management encourages investors and others to review Medallia’s financial information in its entirety and not rely on a single financial measure.

We adjust the following items from one or more of our non-GAAP financial measures:

Stock-based compensation expense. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective assumptions. We also exclude cash expenses for employer payroll taxes related to employee stock plans, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, this expense is tied to the exercise or vesting of underlying equity awards and the price of our common stock at the time of exercise or vesting, which may vary from period to period independent of the operating performance of our business.

Amortization of acquired intangible assets. We exclude amortization of acquired intangible assets, which is a non-cash expense, from certain of our non-GAAP financial measures. Our expenses for amortization of intangible assets are inconsistent in amount and frequency because they are significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. We exclude these amortization expenses because we do not believe these expenses have a direct correlation to the operation of our business.

Restructuring and other. We exclude restructuring and other from certain of our non-GAAP financial measures. Restructuring and other consists of exit costs related to our former headquarters in San Mateo.

Tax benefit related to acquisitions. We exclude tax benefits related to acquisitions from our non-GAAP financial measures. These tax benefits realized consist of the change in the valuation allowance resulting from acquisitions.

Note on Forward-Looking Statements

The forward-looking statements included in this press release and in the accompanying conference call, including for example, discussion of our commercial prospects, partnerships, estimates of future revenues, operating income/loss and expenses, stock-based compensation expense and related employer payroll tax expense, amortization of acquired intangible assets, acquisition-related costs, restructuring and other expenses, and acquisitions, reflect management’s best judgment based on factors currently known and involve risks and uncertainties. These risks and uncertainties include, but are not limited to, potential disruption of customer purchase decisions resulting from global economic conditions, timing and size of orders, relative growth of our recurring revenue, potential decreases in customer spending, uncertainty regarding purchasing trends in the cloud software market, customer cancellations or non-renewal of maintenance contracts or on-demand services, our potential inability to manage effectively any growth we experience, our ability to develop new products and services, increased competition or new entrants in the marketplace, potential impact of acquisitions and investments, changes in staffing levels, and other risks detailed in registration statements and periodic reports we file with the Securities and Exchange Commission, including our prospectus filed with the SEC pursuant to Rule 424(b)(4) dated July 18, 2019 and in our quarterly report on Form 10-Q dated September 12, 2019, both of which may be obtained on the Investor Relations section of Medallia’s website (https://investor.medallia.com/financials/sec-filings/default.aspx). Actual results may differ materially from those presently reported. All forward-looking statements in this press release are based on information available to us as of the date hereof. We assume no obligation to update the information contained in this press release or the accompanying conference call, except as required by law.